I wanted to emphasize a point I made in an earlier post with regards to index fund investing and macro trends. I view long only indexing as a subset of macro investing. That is, I think that all long only index fund investors are making an implicit bullish macro forecast because the positive performance of their underlying portfolio will rely enormously on a positive macro trend.
To emphasize the importance of this point I wanted to highlight the dismal performance of some of the world’s large stocks markets in the last 10-20 years. I doubt the index fund providers of the world are hauling in customers in these markets:
Now, none of this is an intent to bad mouth index fund investing. After all, I am a macro guy and I think indexing is part of macro so I don’t bite the hand that feeds me! So I am a huge advocate of indexing. I am an even bigger fan of cutting frictions out where you can. But I also think it’s important to build a process for portfolio construction and that process requires a specific understanding of what you’re doing when you design that process. Going into a long only index fund approach based on the misconception that you’re “not forecasting” the future is a little naive in my view and misconstrues what that process is based on in the first place.
![Cullen Roche](https://pragcap.com/wp-content/uploads/2022/01/Headshot2022-1-144x144.png)
Mr. Roche is the Founder and Chief Investment Officer of Discipline Funds.Discipline Funds is a low fee financial advisory firm with a focus on helping people be more disciplined with their finances.
He is also the author of Pragmatic Capitalism: What Every Investor Needs to Understand About Money and Finance, Understanding the Modern Monetary System and Understanding Modern Portfolio Construction.
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